Should you worry about overfunding your 529 plan?

Core Insights - 529 education savings plans are effective for managing education costs, but concerns about oversaving exist [1] - The Secure 2.0 Act allows for the rollover of unused 529 funds to a Roth IRA, with specific rules in place to prevent misuse [2][5] Group 1: 529 Plans Overview - 529 plans are often opened at birth, creating uncertainty about future education needs [2] - Parents can change the beneficiary of a 529 plan if they have multiple children [2] Group 2: Rollover Rules - The Roth IRA receiving 529 funds must be in the name of the 529 plan beneficiary and the 529 plan must be open for at least 15 years [3] - Contributions made within the last five years cannot be converted, and the rollover counts toward the IRA annual contribution limit [3][4] Group 3: Conversion Limits - A maximum of $35,000 can be rolled over from a 529 plan to a Roth IRA during a lifetime [4] - The conversion must be made directly to a Roth IRA, and the beneficiary must have eligible earnings at the time of conversion [4] Group 4: Implications of Rollover - The rollover option alleviates concerns about oversaving for education but should not be relied upon for retirement savings [5] - The rules ensure that 529 plans are used primarily for educational purposes, maintaining the integrity of the savings plan [5] Group 5: 529 Rollovers to ABLE Accounts - Families with a child with disabilities can roll over 529 accounts into ABLE accounts, which offer tax advantages while preserving eligibility for government assistance [6] - ABLE accounts operate similarly to 529 plans, with after-tax contributions and tax-free withdrawals for qualified expenses [6]